Wednesday, December 10, 2014

Why Medals?

Ever since I argued with badon on the Chinese Coin Forum and Live Business Chat about the differences between coins and medals, I myself have gradually gravitated towards medals, including brass ones. I received some inquiries on my shift of attitude and position. Instead of answering individually, I hope this post can shed some light on my current understanding of medals vs. coins. Comments are welcome.

Unlike badon, who denies any difference between fiat coins and non-fiat medals, I do see a difference between them. So I still call a coin a coin, and a medal a medal. But (and this is a big "but"), in terms of the precious metal coins issued by PRC after 1979 (MCC), the difference is minimal and nominal. MCCs were never issued for circulation. Instead, they have been produced as "artwork for collection" (from Mr. Zhu Dechun, regarded as father of MCC). In that sense, they are not very different from medals made for the same purpose. (One of the mistakes in MCC collection is to compare MCCs to precious metal coins issued for circulation in the US. This mistake led to many false analogies between the two, in terms of mintage, grade rarity, and predictions of price trends, among others. I really want to emphasize that these two are fundamentally different, as one was meant for circulation, and the other mainly artwork for collection. If anything, MCCs should be compared to the little known precious metal commemorative coins in the US, which were first released in 1892 and the collection of which has not been very popular.)

The main arguments against medal collection include 1) medals are not officially protected and can be counterfeited without punishment; 2) medals lag behind coins in price appreciation. Let's examine these arguments one by one.

First, coins, whether circulating ones or MCCs, are not immune to counterfeiting. Even newly issued circulating commemorative coins with a street value of 15 Yuan ($2.5) are faked. Fake coins are sold on the Chinese Taobao site with no sign of pending official punishment. Punishment for coin counterfeiting has largely remained as a theoretical deterrent, but has so far failed to be effectively implemented. The reason may be that commemorative coins, whether of base metal or of previous metal, are not in circulation and so their faking poses no threat to the financial system, while counterfeiting of large face value paper notes is treated seriously, as the latter are real medium of exchange in life. Whatever the reason, it is a cold fact that MCCs have not been better protected than medals against counterfeiting.

If we look beyond modern Chinese coins and medals, we will see that counterfeiting has not stopped people from collecting/investing in the pre-1949 coins. Coins made from all types of metal, copper, silver and gold, between the time when milled coins were first introduced to China in the late 19th century, up to 1949, are counterfeited recklessly as there is virtually no protection for them. Dies to make Fat Man coins are openly available on Taobao. Cheap fakes flood the market, including eBay. And yet, due to the pioneering work of early collectors, foreigners included, collection of "old silver round" as they are known in China has been the most popular and advanced numismatic category among Chinese coin collection, with detailed studies of their varieties and huge price gaps between high grade coins – phenomena observable in US coin collection. It was no coincidence that the "old silver round" was the first numismatic category to embrace coin grading in China. With the help of grading companies, the risk of running into fake coins is greatly reduced if not totally eliminated, as long as one insists on buying graded specimens.

Second, it is true that many medals have not appreciated in value as fast as coins. I used the example of the Xinjiang silver coin vs. medal in my argument against medals when I first brought up the issue with badon. This is due to the smaller number of medal collectors in the past. "Medals are lesser than coins", a motto among some Chinese collectors, becomes a self-fulfilling prophesy. Because medals are regarded as having less investment value, fewer collect them, which in turn reduces the demand and drags down the price. However, even with the small number of collectors, the top rarities among medals have not lost to coins in the same ranking in price appreciation. Here is a comparison of top silver coins and medals in a fixed time frame. They are priced in the Chinese Yuan.

 (I am comparing top small size silver coins with top medals because I do not keep track of prices of large size coins. Those familiar with large size coins can do a similar comparison. Large size silver coins are not in my range of collection.)

It is obvious that in terms of price appreciation, top silver medals have outrun top small size silver coins. The Jianzhen silver medal set has an even higher rate - close to 40x price growth since December, 2007. Of course, not all the medals appreciate as rapidly. The 1987 Long Beach Expo silver medal, which sold 100 Yuan more than the Jianzhen set at the same auction run by the Oriental Auction House in 2007, has appreciated only slightly in price. Rarity plays a crucial role in price appreciation among medals due to the smaller collector base. The sharp contrast in price appreciation between the top medals and more common ones reveals the profile of current medal collectors: a small number of advanced, well-to-do individuals who collect both coins and medals alike and are relentlessly in pursuit of the rarest medals.

In addition to past price appreciation, we should bear in mind the possibility that the self-fulfilling prophesy "medals are lesser than coins" may be abandoned by new MCC collectors, thus pushing the price of the currently undervalued medals way up. Collectors of the recent Chinese Classical Garden series medals are mostly MCC collectors, too. Is it a sign that the trend is starting to turn?

Finally, as artwork, officially minted medals tend to stand out over coins. Coins are strictly controlled in their theme, design, artistic style, technology and time to market. Low relief is typically required on coins made in large quantity, for example. In comparison, the same mint artists designing medals have a lot more freedom to themselves. Zeng Chenghu spent over a year (on and off) working on his hand-engraved Pagodas, and Bai Wenjun spent nearly a year on his hand-engraved medal set Plum, Orchid, Bamboo and Chrysanthemum. The recently released Chinese Classical Gardens series employed techniques unparalleled in coins, such as double-sided deep dish and ultra-high relief. Some of the most artistically sophisticated artwork exists only in the form of copper medals, such as the hand-engraved Guilin Scenery set. Of course there are exquisitely made MCCs (the first series of lunars, for example) and poorly made medals, especially those commissioned by organizations or individuals. But overall the consensus is that medals are artistically more appealing.

Enjoying wonderful artwork, nice price appreciation, the vanity of owning and bragging about top rarities, with the possibility of a huge price breakout in the future – what can be a more fulfilling experience in numismatic collection and investment?

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